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ESTIMATING DEMAND FOR LOCAL TELEPHONE SERVICE WITH ASYMMETRIC INFORMATION AND OPTIONAL CALLING PLANS
(additional appendices)
(Click above to download a pdf copy of the paper)
- Abstract: In this paper, I study the theoretical and econometric
implications of agents' uncertainty concerning their future consumption when
a monopolist offers them either a unique, mandatory nonlinear tariff or a
choice in advance from a menu of optional two-part tariffs. Agents'
uncertainty is resolved through individual and privately known shocks to
their types. In such a situation the principal may screen agents according
to their ex ante or ex post type, by offering either a menu
of optional tariffs or a standard nonlinear schedule. The theoretical
implications of the model are used to evaluate a tariff experiment run by
South Central Bell in two cities in Kentucky in 1986. The empirical approach
explicitly accounts for the existence of informational asymmetries between
local telephone users and the monopolist, leading to different, nested,
econometric specifications under symmetric and asymmetric information. The
empirical evidence suggests that there exists a significant asymmetry of
information between consumers and the monopolist under both tariff regimes.
All expected welfare components failed to increase with the introduction of
optional tariffs for the estimated value of the parameters.
- Publication: The Review of Economic Studies, 69, 943-971, October 2002.
- JEL: D42, D82, L96.
- First version: April 1997.
- Final version: April 2002.
- Funding: Graduate Student Award at the 24th
Telecommunications Policy Research Conference. Financial support from the Ameritech
Foundation through the Consortium for Research on Telecommunications
Strategy and Policy; Ministerio de Educación y Ciencia, Spain; and TMR
network on "The Evolution of Market Structure in Network Industries."
- Seminars: CEMFI; CentER at Tilburg University; Fundación
Empresa Pública; Instituto de Análisis Económico; INSEAD; Instituto
Tecnológico Autónomo de México (ITAM); London Business School; Wharton School;
Wissenschaftszentrum Berlin für Sozialforschung (WZB); and Universities at
Arizona; California-San Diego; Carlos III; Columbia; Florida; Illinois at
Urbana-Champaign; Iowa; Maryland; New York; Northwestern; Pennsylvania;
Pompeu Fabra; Rochester; Toronto; Valencia; and Yale.
- Conferences: Conference on "Regulation and Competition Policy in Network Industries," IAE-CSIC, Barcelona 1997; 24th EARIE Conference, Leuven 1997; European Meeting of the Econometric
Society, Toulouse 1997; NBER-IO Summer Institute, Boston 1997; and European Summer
Symposium in Economic Theory, Gerzensee 1998.
- Noteworthy: Previously circulated as CEPR DP No. 2635.
- Data.
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